Treasuries Stay Strong Following Decent Jobs Report

By Michael Aneiro

Treasuries have maintained their strength following this morning’s release of the Labor Department’s March nonfarm payrolls report. Bond markets initially strengthened on some short covering and the general lack of surprises offered by the report, with March job gains nearly matching consensus economist projections as well as the ADP job gains reported earlier this week. The ten-year Treasury note’s yield has fallen from 2.797% right before the report’s release this morning to 2.726% most recently, per Tradeweb data.

Here’s Adrian Miller, fixed-income strategist at GMP Securities, with more on the jobs report:

With the primary take-away of today’s NFP report being whether the U.S. economy is truly underperforming or there is a real catch-up in hiring due to the prior poor weather, the data would suggest the labor market is indeed better than thought….

So what does the NFP report tell us? Clearly the strong upside revision in the February report more than offset the slight miss in the March report. But we did not get the catch-up move we expected from depressed job growth in December and January, possibly due in part to the January and February revisions. So if we incorporate the March report and previous revisions we would characterize the report in aggregate as being largely in line even as the household survey recorded somewhat better results than the establishment survey.

From the market’s standpoint with the labor market in better shape than initially expected as evidenced by the revisions equity prices are moving higher. And yet, the labor market is not displaying signs of being poised to record robust growth, which means a steady as she goes approach for the Fed as the probability of a first half 2015 rate hike diminished which plays well for the bond market that is seeing yields fall post report. Net net, the economy is improving and has largely moved past the weather’s negative impact and the labor market is gaining momentum albeit modestly, so all indications suggest we should be able to hit our full year GDP growth rate of +3.0% as the unemployment rate slides near 6% by year end.